Failing Health Care Co-ops Will Cost Taxpayers

Consumer Operated and Oriented Plan Programs (COOPs) were really a political compromise between Members of Congress who wanted a public plan option and those who didn’t. Once the Affordable Care Act passed, COOPs had outlived their usefulness. However, they are now failing and will cost taxpayers plenty. Senior Fellow Devon Herrick testified before a congressional committee.

Executive Summary

There is widespread agreement that the United States Food and Drug Administration (FDA) needs reforming. The drug approval process in the United States is too slow, too expensive and too restrictive. The FDA delays the introduction of new drugs for up to 12 years and does not publish standards of safety or effectiveness that any drug can meet to ensure its approval. As a result:

Thousands of patients die because lifesaving drugs and medical devices available elsewhere are not yet approved for use in the United States.

Surgery, in some cases the only alternative to drug therapy, adds to the pain and suffering.

Pharmaceutical companies are moving drug testing and development facilities out of the U.S. to reduce the costs imposed on them by the FDA approval process.

Contrary to its recent claims of improved efficiency, the FDA still delays drug development and approval, while rejecting more applications for approval of new drugs.

Congress is considering substantial reforms that include elements of the European drug and medical device approval system: self-certification by manufacturers, certification by public or private third parties and independent review committees. However, these reforms would leave FDA bureaucrats in control of drug approvals or increase political influence over the process.

The best way to make the process more efficient while preserving the safety and effectiveness of drugs is to adopt a market-based system. In such a system, the FDA would have little or no role, and private, independent third parties would certify all drugs and devices.

The model for a market-based drug certification system is Underwriters Laboratories, Inc. (UL), an independent, not-for-profit safety certification and standards-writing organization. For more than 100 years, UL has certified the safety of products on which millions of Americans rely. It shows how the marketplace can preserve third-party independence, since UL, consumers and manufacturers all have incentives to support high standards as well as fast, efficient certifications.

Manufacturers are not legally required to seek UL approval, but tens of thousands do. Product makers want to meet recognized standards in order to satisfy consumers and because they are legally liable for unsafe products. Competition between UL and other organizations ensures the integrity of the certification process. Even government agencies use UL standards:

More than 40,000 local jurisdictions across the U.S. accept the UL mark and work with UL to develop electrical, building and safety codes.

The federal Occupational Safety and Health Administration uses UL to independently test and certify products for hazardous locations, works with UL to revise and implement product standards and in some cases even uses UL's standards.

Private certification would allow people in different circumstances to balance the risks they choose to accept. Under such a system, a drug might be available without third-party certification, but doctors would be very reluctant to prescribe it. The only consumers who would use such drugs might be those willing to take great risks, such as terminally ill AIDS and cancer patients, but no one would be denied access to lifesaving drugs.

Private certification would be faster, less expensive and just as safe as the current FDA system.